Manila, October 19:

South Asia has the potential to go the way of robust economies of East Asia, but India and its neighbours must do more to cut red tape and remove regulations that stunt business initiative,

the Asian Development Bank (ADB) said today.

The ADB stated in a report released here yesterday that improved governance, better quality of regulation and infrastructure can help South Asian economies emerge as the ‘New Tigers’ of the region. South Asia, led by India and Pakistan, posted stellar growth in 2005 and has registered higher growth than its peers in Southeast Asia in the past five years, with high growth forecast to continue through at least next year.

Its banking sectors have not only improved their performance over the recent past, but have also reduced the performance gap between themselves and other economies in Asia, according to the ADB’s South Asia Economic Report.

However, the performance in state-owned banks has generally been weaker than that of private and foreign banks. Restructuring and privatising state-owned banks should remain a high priority on the reform agenda, it added.

“Despite a shift towards market liberalisation, South Asia continues to be overregulated. As a result, it is not fully realising its growth potential.” The bank said firms are ‘frequently confronted with a heavy burden of administrative regulations’ and in general 12 signatures are required to export and 24 to import, compared to five and seven, respectively, in large Southeast Asian economies.

“South Asia stands at a critical juncture, where the potential for sustained high growth and poverty reduction is excellent. A unique opportunity exists to drastically redu-ce poverty over the next decade, pr-ovided the right choices are made,” said Kunio Senga, director-general of ADB’s South Asia department.

It concludes that there is considerable scope for improvement in the effectiveness and efficiency of government interventions.